The proposed deal aims to unify operations under a joint holding company, led by Honda, while maintaining the distinct identities of each brand, according to Honda's president, Toshihiro Mibe. If finalized, the merger would position the combined entity to better compete with market leaders Toyota and Volkswagen.

Tesla stock rose early Tuesday, adding to recent gains even as the auto industry prepares for its latest shake-up. Tesla stock was up 1.1% to $435.58 in premarket trading. Shares rose 2.3% on Monday.

Honda and Nissan have announced plans to merge as the Japanese automakers struggle with competition from rival brands in the electric vehicle market. The two companies confirmed on Monday that they had signed a memorandum of understanding that would create the third largest car maker by sales,